German Five-Year Funding Cost Slides

FRANKFURT–Germany’s five-year funding costs fell to their lowest level since August at a bond auction Wednesday as the aftershock of the Cypriot banking crisis and Italy’s continuing struggle to form a new government pushed investors towards the euro zone’s safe havens.

Germany sold €3.288 billion ($4.21 billion) of its 0.5% February 2018-dated federal note, also known as a Bobl, the Bundesbank said. The German Finance Agency has penciled in the launch of a new Bobl series on May 8.

The average yield was 0.33%, down from 0.45% at the previous auction a month ago and the lowest level since Aug. 1, when Germany sold five-year debt at a yield of 0.31%. German five-year yields dipped to a low of around 0.22% late July.

“Risk aversion was the main boost to this relatively smooth auction,” said Jean Francois Robin, global head of strategist at Natixis. In his view, German paper remains on the expensive side and “it takes a very lasting negative view on the euro zone to invest for five years at such a low yield.”